Thursday, 6 February 2014

Kenya to host AU agency for diaspora cash

The Kenya-based AIR Secretariat is expected to seek ways of improving
legal and regulatory environments with aim of encouraging more Africans
abroad to send money home.

The African Union has settled on Nairobi to host its remittances
advisory unit as governments look to encourage emigrants to send money
back by making transfers more affordable.

In a
statement issued from its headquarters on Monday, the AU Executive
Council directed the AU Commission to conclude the Host Agreement with
Kenya to ensure the formal take-off of the African Institute for
Remittances (AIR) this year.

Kenya beat Mauritius,
Egypt and Djibouti which have all been campaigning since 2010 to host
the AIR Secretariat. The institute is scheduled to be fully operational
by 2015, said the AU.

“The establishment of AIR, the
first of its kind in the world, is a cornerstone in harnessing diaspora
resources for social and economic development in Africa”, the statement
quoted AU commissioner of social affairs, Dr Mustapha Kaloko, as having
said.

POLICY VACUUM

The
plan to set up a fully-fledged secretariat in Nairobi marks a major
step by African governments to address the current policy vacuum to make
the transfers cheaper, faster and safer.

The AU has already drawn up a budget of Sh234 million (€2.1 million) for setting up the AIR Secretariat in Nairobi.

Out
of the planned expenditure, Sh196 million (€1,676,271) is a grant from
the European Commission while the rest (equivalent to Sh54 million
($632,159) is to be disbursed by the World Bank.

“The
project partners agreed to the need for sustained collaboration and
coordination of efforts in support of the Institute to achieve the
planned improvement in the market for remittances, and to leverage their
impact on development in the continent,” the AU said in a statement.

Through
research, the Kenya-based AIR Secretariat is expected to seek ways of
improving legal and regulatory environments with aim of encouraging more
Africans abroad to send money home.

The African
ministers have in the past recommended increased competition and
adoption of innovative financial products as one way of driving cost of
remittances.

The sub-Saharan Africa is already a top
recipient of diaspora remittances but high transfer costs have been
cited among hurdles that need to be addressed expeditiously.

TEA EXPORT

At
continental policy level, Africa’s migrant population is seen as a
critical economic force due to large size and billions of dollars they
remit home each year.

The World Bank estimates that
North America has 39.16 million Africans, Latin America 112.65 million,
Caribbean 13.56 million while Europe has 3.51 million.

The
2013 remittances forecast by the World Bank was $33 billion in 2013, a
figure that is expected to grow to $36 billion this year and to $39
billion by end of next year. This money is usually spent mainly on
consumer goods.

The Nairobi-based Secretariat faces a
hard task of crafting policies that will see the funds go to productive
segments that empower citizens economically.

Kenya
itself is a top recipient of diaspora remittances with Kenyans living
abroad sending home a total of Sh110.9 billion last year.

The
level of receipt rivals annual tea export, is equivalent to one third
of the country’s 2013/4 budget deficit and double the $750 million
borrowed from International Monetary Fund through extended credit
facility.

For Kenya, the selection comes just weeks
after AU chose Nairobi to host the Pan-African University’s Institute
for Basic Sciences, Technology and Innovations last year. Kenya also
hosts the Inter-African Bureau for Animal Resources.